DWP is outmaneuvered in deal for wind farm site

A venture led by a friend of Villaraigosa picks up a 68,000-acre

A business venture led by a friend and advisor to Los Angeles Mayor Antonio Villaraigosa outmaneuvered the city last year to buy land in Kern County that the Department of Water and Power wanted for a wind farm.

The purchase of Onyx Ranch, which covers nearly 68,000 acres east of Bakersfield, highlights the dual roles played by J. Ari Swiller, an entrepreneur whose field, renewable energy, has received a significant boost from the mayor's pledge to make Los Angeles "the greenest big city in America."

Swiller and the mayor have long-standing ties. Both were employed by supermarket billionaire Ron Burkle at the start of the decade, after Villaraigosa lost his first run for mayor. When Villaraigosa announced his second mayoral bid in 2004, Swiller served as a campaign fundraiser. And after Villaraigosa won, Swiller helped him decide who should be appointed to various city commissions.

Since 2004, Swiller also has been a co-owner of Renewable Resources Group, a Los Angeles-based firm that develops and invests in clean energy.

In the case of Onyx Ranch, the venture headed by Swiller beat the DWP to the land, bought it for $48 million and, before the transaction was completed, offered to sell less than half of it to the utility for $65 million.

H. David Nahai, the DWP's general manager, rejected the offer. Swiller's venture, a partnership between his and another firm, then sold the portion sought by Los Angeles for $42 million to the city of Vernon, a neighboring industrial community with its own electric utility.

Since then, Los Angeles officials have been weighing whether to wage a potentially costly and lengthy legal battle against Vernon to gain ownership of the land, considered prime territory for towering turbines that would generate electricity from the winds that blow across the Tehachapi Mountains.

Villaraigosa's appointees at the DWP met behind closed doors two weeks ago to discuss a possible purchase from Vernon, a move that would help the mayor keep his promise to bring wind, solar and geothermal to the nation's largest municipally owned utility.

The man monitoring the DWP's progress on that promise is Deputy Mayor S. David Freeman, who was appointed in April to handle environmental issues for Villaraigosa. Freeman also knows Swiller, having helped him found Renewable Resources Group in 2004. He left the firm in 2005 to become one of the mayor's harbor commissioners.

Swiller has repeatedly declined requests from The Times to say whether he has other business activities that intersect with the mayor's policy priorities. He also declined to be interviewed directly, asking that questions be sent to his lawyer.

In her written responses, attorney Lynda B. Goldman said Swiller did not know that the DWP wanted control of Onyx Ranch until early 2008. A private wind developer who was party to the negotiations, however, said that he believes Swiller knew of the DWP's involvement months earlier.

Nick Patsaouras, a former DWP commissioner, said he believes that the Swiller venture's purchase and resale of the valuable terrain has probably delayed the DWP's plan for developing a wind farm on the site by at least three years. Patsaouras, a onetime Villaraigosa appointee, also warned that the DWP would probably be forced to pay a higher price than it had anticipated.

"Now they are in a situation where they will have to pay a premium," he said.

Villaraigosa spokesman Matt Szabo said the mayor would not comment on whether the city utility should complete such a purchase -- or whether the transactions at Onyx Ranch have complicated the DWP's wind farm plans. Szabo said Villaraigosa was unaware of the situation and "does not discuss his friends' private business matters with them." He added: "It's not part of the mayor's agenda to worry about people's private business dealings."

Swiller's attorney said her client had no conversations about Onyx Ranch with the mayor or any of his representatives. She called Patsaouras' assertions about the effect on the DWP "highly questionable" and said Swiller and his partners made "numerous attempts to purchase the property." One of Swiller's business partners made an offer in 2001. Three years later, Swiller's firm made another attempt, she said.

"For more than a decade, it has been common knowledge among renewable-energy professionals active in Southern California that Onyx Ranch could produce wind power," she wrote.

Goldman said Swiller's venture had hoped to develop a wind farm on the southern portion of Onyx Ranch but changed plans once the DWP threatened to go to court to force a sale of the property. Given the risks associated with an eminent domain action, Swiller's venture concluded it was best to sell 30,000 acres of Onyx Ranch and "remove itself from the future development of the site," Goldman said.

The DWP's Nahai said he was not troubled that someone close to Villaraigosa had bought and resold property sought by his agency.